Investment Dictionary

Minimum Required Distribution (MRD)

A minimum required distribution is the smallest amount you can take each year from your 401(k), 403(b), traditional IRA, or other retirement savings plan once you’ve reached the mandatory age for making withdrawals, usually 70 1/2. If you take less than the required minimum, you owe a 50% penalty on the amount you should have taken. You calculate your MRD by dividing your account balance at the end of your plan’s fiscal year – usually but not always December 31 – using a divisor determined by your age.